The Economic Recovery Tax Act of 1981 was signed by President Reagan on Aug. 13, with the traditional ceremony that has come to mark the signing of important legislation by the U.S. President. The effects of the Act are now beginning to appear, but we can be by no means sure that these effects are those that the President expected. When, just over a year ago, the newly-installed Administration asked Congress to pass a tax Bill, the intention was to stimulate the demand for consumer goods by allowing taxpayers to keep more of their own money. It was also intended to encourage investment in machines and equipment. The price for these tax benefits was to be a substantial cut in government spending, and it was agreed on all sides that the federal government was profligate and inefficient, well able to afford savings.

The U.S. Government has now discovered, not to everybody’s surprise, that Congress is much less willing to reduce expenditure than to reduce taxes. Voles may be earned by tax cuts, but votes may be lost by cutting food stamps or social security benefits. Nor has the President found a way of reconciling a lower revenue with an increased defence budget: Congress has just passed the largest-ever defence budget, and a record deficit at the end of the year is forecast. It was not so very long ago that there was talk of a balanced budget, and even of legislation that would require the government to spend no more in a year than it received in revenue.

The American Constitution is firmly based on the separation of powers, and Congress does not have to defer to the President. Conflicts over the national budget have already caused the machinery of government to come to a temporary halt one day in December, and some members are saying that taxes will have to be increased. The 1981 tax Act itself is an illustration of Congressional independence: it went further than the President wanted, and is a complex measure that makes even more involved a tax code not known for its simplicity. Every government in turn has promised tax simplification, but the complexity of the task requires much more effort and commitment than are available. Special interests have always to be considered,